09.27.2011
By Terry Flanagan

Onus On Market Participants

With the markets on edge as the elevated level of volatility continues, market participants assert that the responsibility for improving the economic landscape rests squarely on their own shoulders.

“We are again in a period of exceptional economic and financial turbulence,” said Jos Schmitt, chief executive officer of Alpha Group, at Markets Media’s Canadian Trading Network conference. “The IMF is saying the global economy is entering a dangerous new phase and they revised downwards the estimates for global economic growth. There will be further negative impact on the bottom lines of many financial institutions. The climate on Wall Street was quite grim, and to be honest, I’m starting to see some similar symptoms here on Bay Street.”

Although the ongoing volatility has resulted in elevated trading volume and order flow, early indications show that the bump was not enough to give struggling market participants, including broker-dealers, any substantial gains come the end of the third quarter.

JPMorgan Chase warned in mid-September that third-quarter trading revenue was expected to fall about eight percent from a year earlier. Investment banking was also projected to drop about one-third. Analysts also expect the other big banks, including Bank of America, Citigroup and Goldman Sachs, to also have weak third quarters. Job cuts continue to be a fear among all financial institutions.

“Our industry is facing a period of deep cost cutting that will leave many in a precarious situation,” said Schmitt. “It’s in periods like this that market infrastructure organizations, whether exchanges, ATSs, clearinghouses, depositories, need to stand up and leverage the vital role they play to bring to the industry what they really need, cost efficiency and innovation. We are not only accountable to our shareholders, but we are also, if not more accountable, to our economy, the industry, to its success with support in periods of turbulence.”

Alpha is owed by Maple Group, a consortium of Canadian banks and financial institutions that is currently awaiting regulatory approval for a proposed acquisition of TMX Group, the operator of the Toronto Stock Exchange.

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